Hearing Announced to Investigate Failures of Silicon Valley Bank and Signature Bank

Summary

• The House Financial Services Commission has announced a hearing on the failures of Silicon Valley Bank and Signature Bank.
• Federal Deposit Insurance Corporation, Federal Reserve, and other financial regulators will be testifying.
• The Department of Justice, Securities and Exchange Commission have also launched their own investigations.

Background

On March 17th, 2023, the United States House Financial Services Committee announced it would be holding a hearing on March 29th to investigate the collapse of two major banks. Representatives Maxine Waters (D-CA) and Patrick McHenry (R-NC), the ranking member and chair of the committee respectively, said U.S. lawmakers would listen to testimony from federal financial regulators in response to the failures of Silicon Valley Bank (SVB) and Signature Bank. In addition to FDIC Chair Martin Gruenberg and Fed Vice Chair for Supervision Michael Barr testifying before Congress, there are reports that the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have launched their own investigations into some bank executives who sold stock in the weeks leading up to closure.

Silicon Valley Bank’s Collapse

Silicon Valley Bank was shuttered on March 10th following a bank run among major depositors. The government stepped in soon after saying most uninsured depositors — those with more than $250,000—would be covered. It is believed that exposure to crypto firms may have been a potential cause for SVB’s collapse.

Signature Bank’s Collapse

In contrast to SVB’s situation, reports suggested that Signature Bank had no issues with solvency at the time it closed on March 12th but New York regulators stepped in giving control over its insurance process to FDIC. The SEC is now looking into any potential insider trading activity prior to closure as well as any suspicious activities leading up to its failure.

Conclusion

The public hearing set for March 29th will likely provide further clarity into why both Silicon Valley Banks and Signature Banks failed so suddenly within a week of each other despite seemingly having different underlying causes for their respective collapses. More information should emerge once more investigations by federal agencies such as DOJ, SEC take place in order for Congress members can “get to the bottom” of what went wrong at both banks during this difficult period for them.